Flying Horse Farms. Financial Statements December 31, 2017 and 2016 (with Independent Auditors Report)

Transcription

1 Financial Statements (with Independent Auditors Report)

2 TABLE OF CONTENTS Independent Auditors Report Financial Statements: Statements of Financial Position Statements of Activities... 5 Statements of Functional Expenses Statements of Cash Flows Notes to the Financial Statements

3 INDEPENDENT AUDITORS REPORT To the Board of Directors of Flying Horse Farms Mt. Gilead, Ohio Report on the Financial Statements We have audited the accompanying financial statements of Flying Horse Farms (an Ohio not-for-profit corporation), which comprise the statements of financial position as of, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Flying Horse Farms as of, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Clark, Schaefer, Hackett & Co. Columbus, Ohio March 14,

5 Statements of Financial Position Assets Current assets: Cash and cash equivalents $ 1,294, ,240 Current portion of contributions receivable, net of allowance of $60,000 and $30,000, respectively 957,530 1,663,981 Investments 6,628 - Other receivables 1, Prepaid expenses 75,021 67,188 2,334,592 2,315,455 Property and equipment: Construction in progress 219,562 93,570 Buildings 13,611,852 13,550,690 Land improvements 727, ,321 Vehicles 91,318 86,032 Equipment 889, ,518 15,540,211 15,338,131 Less accumulated depreciation 3,219,272 2,754,532 12,320,939 12,583,599 Other assets: Contributions receivable, less current portion 1,086,989 1,148,107 $ 15,742,520 16,047,161 See accompanying notes to the financial statements. 3

6 Statements of Financial Position (continued) Liabilities and Net Assets Current liabilities: Current portion of long-term debt $ 128, ,718 Current portion of capital lease obligation 5,202 5,024 Line of credit 654, ,847 Accounts payable 9,672 16,382 Accrued expenses 117, , , ,909 Other liabilities: Long-term debt, less current portion 2,029,438 2,741,168 Less: unamortized debt issuance costs (254,013) (268,062) Capital lease obligation 15,280 20,482 1,790,705 2,493,588 Net assets: Unrestricted net assets 10,873,426 10,841,114 Temporarily restricted net assets 2,162,896 2,023,550 13,036,322 12,864,664 $ 15,742,520 16,047,161 See accompanying notes to the financial statements. 4

7 Statements of Activities Years Ended Changes in unrestricted net assets: Revenue: Contributions $ 2,686,064 3,513,271 Release of restricted contributions 1,872,460 1,209,935 Other 18,727 14,314 4,577,251 4,737,520 Expenses: Program services 2,841,687 2,880,796 Management and general 524, ,774 Fundraising 1,174,781 1,341,234 4,541,383 4,802,804 Other expense - Loss on disposal of assets (3,556) (29,515) Change in unrestricted net assets 32,312 (94,799) Changes in temporarily restricted net assets: Restricted contributions 2,011,806 1,318,569 Restricted contributions released (1,872,460) (1,209,935) Change in temporarily restricted net assets 139, ,634 Change in net assets 171,658 13,835 Net assets - beginning of year 12,864,664 12,850,829 Net assets - end of year $ 13,036,322 12,864,664 See accompanying notes to the financial statements. 5

8 Statement of Functional Expenses Year Ended December 31, 2017 Program Management Services and General Fundraising Total Salaries $ 1,194, , ,512 2,109,893 Payroll taxes 96,235 27,027 45, ,219 Employee benefits 159,133 47,443 99, ,423 Advertising 23,999-25,421 49,420 Special event supplies , ,369 Contract labor 1, ,167 Insurance 60,121 4,037-64,158 Travel and entertainment 6,716-2,430 9,146 Professional fees 97,200 45,991 12, ,491 Printing and postage 5, ,245 9,979 Bank and service fees 2,236 3,472 11,366 17,074 Supplies 461,778 8,277 16, ,035 Rent 26, ,515 Meetings 6, ,510 Interest 98, , ,619 Utilities 92,773 1,456 2,557 96,786 Bad debt ,398 41,398 Amortization - 14,049-14,049 Depreciation 498,747 4,278 9, ,815 Miscellaneous 10, ,893 23,317 $ 2,841, ,915 1,174,781 4,541,383 See accompanying notes to the financial statements. 6

9 Statement of Functional Expenses Year Ended December 31, 2016 Program Management Services and General Fundraising Total Salaries $ 1,178, , ,020 2,192,706 Payroll taxes 89,733 26,208 49, ,842 Employee benefits 180,756 57, , ,665 Advertising 31,825-42,781 74,606 Special event supplies , ,217 Contract labor 1, ,545 Insurance 57,457 3,986-61,443 Travel and entertainment 5, ,036 10,055 Professional fees 61,965 39,865 7, ,845 Printing and postage 6,737 2,146 4,141 13,024 Bank and service fees 2,178 8,030 8,675 18,883 Supplies 523,640 14,844 28, ,932 Rent 33, ,609 35,453 Meetings 1, ,390 Interest 114, , ,833 Utilities 92,692 1,388 2,546 96,626 Bad debt , ,681 Amortization - 19,141-19,141 Depreciation 498,359 4,275 9, ,416 Miscellaneous 1,589 3, ,501 $ 2,880, ,774 1,341,234 4,802,804 See accompanying notes to the financial statements. 7

10 Statements of Cash Flows Years Ended Cash flows from operating activities: Change in net assets $ 171,658 13,835 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation and amortization 526, ,557 Bad debt 41, ,681 Loss on disposal of assets 3,556 29,515 In-kind contributions (60,669) (349,437) Change in discount for future pledges 30,414 31,583 Forgiveness of debt (291,768) (291,768) Effects of changes in operating assets and liabilities: Contributions receivable 695,757 (79,052) Other receivable (1,320) 311 Prepaid expenses (7,833) 33,312 Accounts payable (6,710) (95,559) Accrued expenses (23,198) 49,496 Net cash provided (used) by operating activities 1,078,149 (526) Cash flows from investing activities: Proceeds from sale of assets 4,522 - Purchase of property and equipment (209,654) (93,233) Proceeds from sale of investments 5, ,405 Net cash provided (used) by investing activities (199,670) 153,172 Cash flows from financing activities: Payments on notes payable (416,486) (413,132) Net borrowings on line of credit 252, ,847 Repayments of capital lease (5,024) (1,144) Net cash used by financing activities (168,672) (12,429) Increase in cash and cash equivalents 709, ,217 Cash and cash equivalents - beginning of year 584, ,023 Cash and cash equivalents - end of year $ 1,294, ,240 See accompanying notes to the financial statements. 8

11 Statements of Cash Flows (continued) Years Ended Supplemental Disclosures of Cash Flow Information Cash paid during the year for interest $ 101, ,833 In-kind donations received and expensed in the same period $ 578, ,087 Noncash investing and financing activities: In-kind contributions: Investments $ 12, ,405 Property and equipment 48, ,032 Capitalized equipment - 26,650 Bond debt forgiveness 291, ,768 $ 352, ,855 Change in discount for future pledges $ (30,414) (31,583) See accompanying notes to the financial statements. 9

12 Notes to the Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The following accounting principles and practices of Flying Horse Farms are set forth to facilitate the understanding of data presented in the financial statements: Nature of activities Flying Horse Farms (the Organization) is a non-profit organization that provides magical, transformative camp experiences for children with serious illnesses and their families. Located on approximately 200 acres just outside of Mt. Gilead, Ohio, the Organization hosts hundreds of children and families each year free of charge. The children who benefit from the camp have illnesses including arthritis, asthma, cancer, bleeding disorders, gastrointestinal disease, heart disease, kidney disease, and craniofacial anomalies. Flying Horse Farms is a member of the SeriousFun Children s Network, the world s largest family of camps for children with serious illnesses. Founded in 1988 by Paul Newman, the Network has collectively served more than 605,000 children and families from five continents and 50 countries. Flying Horse Farms has also received ACA-Accredited Camp status after submitting to a thorough review by the American Camp Association. Basis of accounting The financial statements of the Organization have been prepared on the accrual basis of accounting and, accordingly, reflect all significant receivables, payables, and other assets and liabilities. Basis of presentation The Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Cash and cash equivalents For the purpose of the statement of cash flows, the Organization considers all highly liquid investments with initial maturity of three months or less to be cash equivalents. Receivables Unconditional contributions receivable are recognized as revenues or gains in the period received and as assets, decreases of liabilities, or in-kind expenses depending on the form of the benefits received. Contributions receivable consist primarily of amounts due from individuals. The receivables are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to bad debt expense in the statements of activities and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to receivables. Investments The Organization carries investments in marketable equity securities with readily determinable fair values at their fair values in the statements of financial position. Unrealized gains and losses are included in the change in net assets in the accompanying statements of activities. 10

13 Notes to the Financial Statements Property and equipment Property and equipment are recorded at cost, or fair value, if donated. Assets acquired through capital lease agreements are capitalized at their fair market value as of the date of lease inception. Depreciation on property and equipment is provided using the straight-line method over the estimated useful life, which is five years for vehicles, three to fifteen years for equipment, thirty-nine years for land improvements and thirty-nine years for buildings. Additions and betterments in excess of $500 are capitalized, while maintenance and repairs that do not improve or extend the useful lives of the respective assets are expensed as incurred. Restricted and unrestricted revenue and support Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restrictions expire (that is, when a stipulated time restriction ends or the purpose of the restriction is accomplished) in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as release of restricted contributions. Unamortized bond refinancing costs Bond financing costs in connection with the Organization s financing are amortized over the life of the bond using the straight-line method. Accumulated amortization totaled $51,687 and $37,638 for the years ended, respectively. The remaining unamortized costs associated with these fees totaled $254,013 and $268,062 as of, respectively, and are shown net of the related outstanding debt in the accompanying statements of financial position. The estimated amount of amortization expense for each of the next five years is $14,049. Donated assets Donated marketable securities and other non-cash donations are recorded as contributions at their fair values at the date of donation. The Organization does not imply a time restriction on gifts of long-lived assets. Donated services Donated services are recognized as contributions in the accompanying statements of activities, if the services (a) create or enhance non-financial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Organization. Volunteers also provided various services throughout the year that are not recognized as contributions in the financial statements since the recognition criteria were not met. During the years ended, the estimated value of donated services that met the recognition criteria was $183,754 and $237,222, respectively for health care services, accounting, legal, and information technology services. The services are included in the accompanying statements of functional expenses as salaries or gift-kind expense. Values of contributed services originate from the volunteer hours provided by each professional multiplied by the market rates for those services. Expense allocation The costs of providing various programs and other activities have been summarized on a functional basis in the statements of activities and in the statements of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 11

14 Notes to the Financial Statements Advertising expense The Organization uses advertising to promote its programs among the audiences it serves. The production costs of advertising are expensed as incurred. Income taxes The Organization is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. In addition, donations to the Organization qualify for the charitable contribution deduction under Section 170(b)(1)(A) and the Organization has been classified as an organization that is not a private foundation under Section 509(a)(2). Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Subsequent events The Organization evaluates events and transactions occurring subsequent to the date of the financial statements for matters requiring recognition or disclosure in the financial statements. The accompanying financial statements consider events through March 14, 2018, the date on which the financial statements were available to be issued. 2. CONTRIBUTIONS RECEIVABLE: Unconditional contributions receivable at consist of the following: Unconditional contributions receivable $ 2,138,984 2,906,967 Less: Allowance for uncollectible pledges 60,000 30,000 Discounts to net present value 34,465 64,879 Net present value of contributions receivable 2,044,519 2,812,088 Less current portion 957,530 1,663,981 $ 1,086,989 1,148,107 12

15 Notes to the Financial Statements Receivable in less than one year $ 1,019,984 1,721,634 Receivable in one to five years 1,054,000 1,107,833 Receivable in more than five years 65,000 77,500 Total unconditional contributions receivable $ 2,138,984 2,906,967 The discount rate was 3.25% at, respectively. 3. FAIR VALUE MEASUREMENTS: Generally accepted accounting principles define fair value, establish a framework for measuring fair value, and establish a fair value hierarchy that prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach are used to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities the Organization has the ability to access. Level 2 inputs are inputs (other than quoted prices included within Level 1) that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for the asset or liability and rely on management s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The following table presents the Organization s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2017: Level 1 Level 2 Level 3 December 31, 2017 Common Stock: Services $ 5, Healthcare 1, $ 6, Common stocks valued at the closing price reported on the active market on which the individual securities are traded. 13

16 Notes to the Financial Statements 4. LINE OF CREDIT: During 2016, the Organization opened a $400,000 line of credit with Serious Fun Children s Network. Each advance on the line bore interest at a rate of 2% with all interest due on January 31, The line matured in May During 2017, the Organization opened a $650,000 line of credit with Serious Fun Children s Network. Each advance bears interest at a rate of 2% with all due on January 31, The outstanding balance on the line of credit as of was $654,685 and $401,847, respectively, which includes accrued interest of $4,685 and $1,847, respectively. 5. LONG-TERM DEBT: Long-term debt at consists of the following: Revenue bonds payable $ 2,157,632 2,865,886 Less current portion (128,194) (124,718) Principal payments over the next two years are as follows: 2018 $ 128, ,029,438 $ 2,157,632 $ 2,029,438 2,741,168 The Organization borrowed $4,090,000 from the proceeds of Hospital Facilities Revenue Bonds, Series 2010 (the 2010 bonds) issued by the County of Morrow, Ohio. In conjunction with the issuance of the 2010 bonds, the Organization entered into a lease agreement with the County of Morrow, Ohio covering substantially all facilities of the Camp. The lease expires on the earlier to occur of payment of the 2010 bonds or the termination of the lease agreement by the County of Morrow, as a result of a default by the Organization. Annual lease payments to be paid by the Organization over the term of the lease are sufficient to pay the debt service requirements of the 2010 bonds. Upon termination of the lease agreement, all the Organization s facilities financed with the proceeds from the 2010 bonds will be conveyed to the Organization. This agreement requires the Organization to meet certain financial covenants. The bonds mature in 2036 and interest is payable monthly as follows; $1,022,500 at variable rate (3.03% at December 31, 2017) and $3,067,500 at 3.61%. The bonds are secured by a mortgage with a related party. 14

17 Notes to the Financial Statements In November 2015, the bonds were purchased by organizations related to two board members. The provisions of the bonds with the new investors are the same as prior to refinancing of the bonds except that the term was extended an additional year. The bonds are subject to a mandatory purchase in whole by Flying Horse Farms on March 1, On March 1 of each year Flying Horse Farms may request that the Bond owners extend the mandatory repurchase day by an additional year. A portion of bonds was forgiven during the years ended, in the amount of $291,768, respectively. 6. TEMPORARILY RESTRICTED NET ASSETS: Temporarily restricted net assets consisted of the following at : Future camp sessions $ 1,468,725 1,003,661 Happy Time workshop 205, , Campfire - 337, Campfire 444,639 - Staff development - 3,000 Facility improvements 8, ,058 Other 35, , OPERATING LEASES: $ 2,162,896 2,023,550 The Organization has two non-cancelable operating leases for office equipment expiring at various dates through Future minimum lease obligations subsequent to the year ended December 31, 2017 are as follows: 8. CAPITAL LEASE: 2018 $ 1, $ 1,413 In 2016, the Organization entered into an agreement to lease equipment under a capital lease that will expire in September The economic substance of the lease is that the Organization is financing the acquisition of an asset through the lease and, accordingly, this amount is recorded in the Organization s assets and liabilities. 15

18 Notes to the Financial Statements As of December 31, 2017, the equipment and related depreciation recorded under the capital lease that was included in the accompanying statements of financial position is as follows: Equipment $ 26,650 Less: accumulated depreciation (6,218) $ 20,432 The following is a schedule of future minimum payments required under the lease together with the present value as of December 31, 2017: Years Ended December 31, , , , ,377 Total minimum payments 21,885 Less: amount representing interest at 3.5% (1,403) 20,482 Less: current portion (5,202) $ 15,280 Amortization of assets held under capital lease is included in depreciation expense. 9. RETIREMENT PLAN: The Organization offers a retirement plan and provides for a discretionary matching contribution. The total discretionary matching contribution expense for the years ended was $900 and $43,271, respectively. 10. CONCENTRATION OF CREDIT RISK AND CONTRIBUTIONS RECEIVABLE: The Organization maintains its cash balances in one financial institution located in Columbus, Ohio. Cash balances are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution. As of, the Organization had uninsured cash balances of $1,199,396 and $411,421, respectively. The Organization received unconditional promises to give from Board members, which at December 31, 2017 and 2016 represented approximately 50% and 36% of the contributions receivable, respectively. 16

19 Notes to the Financial Statements 11. RELATED PARTY TRANSACTIONS: The following related party transactions occurred during the years ended : The Organization received a contribution of a lease from a Board member for the property where the camp is located. The lease will expire when the land ownership is transferred to the Camp. The Organization has recorded contributions receivable from Board members and employees totaling $1,059,825 and $1,033,485 as of, respectively. Included in contributions receivable is a contribution of land from a board member valued at $900,000 as of December 31, 2017 and